For City Council Meeting October 28, 2025
TO: Honorable Mayor and City Council
FROM: Tanya Williams, City Manager
Title
Request City Council/Rialto Utility Authority Board Set a Public Hearing for January 13, 2026, and establish Utility Rate Setting Procedures through Adoption of Resolution No. 8418 and RUA Resolution No. 08-46 Regarding Water and Wastewater Utility Services Rate Adjustments.
Body
RECOMMENDATION
Staff recommends that the City Council/Rialto Utility Authority Board set a public hearing and establish Utility Rate Setting Procedures through adoption of resolutions setting a public Hearing regarding Water and Wastewater Utility Services Rate Adjustments.
BACKGROUND
On July 23, 2024, the City Council/Rialto Utility Authority (RUA) Board adopted a one-year rate adjustment, effective January 1, 2025, for water and wastewater services. The one-year rate was based on a five-year financial projection. Staff were directed to return in 2025 with an updated rate analysis for Council/RUA Board reevaluation.
In accordance with the City Council’s direction to return in 2025 for a reevaluation, staff is preparing to present an updated analysis to the City Council/RUA Board to reassess the water and wastewater rates. On July 24, 2025, staff shared a proposed schedule for the rate study with the Water Subcommittee and requested feedback to support the development of the updated rate analysis. Further, on September 18, 2025 the Water Subcommittee reviewed the proposed rates and recommended they go before the City Council for adoption.
ANALYSIS/DISCUSSION
Staff representing both the City and RUA are working with the contracted utility service provider, Rialto Water Services, LP (RWS), along with the City’s financial consultant (Sanjay Guar and his team at Water Resources Economics) to prepare a financial analysis and rate study to determine the potential rate increases necessary to cover the costs of providing utility services in compliance with the 2012 Concession Agreement between the City, the RUA, and RWS. The five-year analysis considers projected expenditures, Capital Improvement Program (CIP) projects, cash reserves, potential long-term debt financing, and debt coverage requirements.
On September 18, 2025, the Water Subcommittee provided feedback to move the item to the City Council for consideration.
At the public hearing on January 13, 2025 the City Council will hear and review the full rate proposal for consideration.
The Water Resources Economics Rate Study (October 2025) Report is included as Attachment 1.
Procedural Considerations
The Recommendation includes adoption of a resolution to establish Utility Rate Setting Procedures that clarify the process to be followed by the City and the RUA to comply with Proposition 218 (California Constitution Article XIII D, Section 6) as well as new legislation effective January 1, 2025, known by its bill number “AB 2257” and now codified at Government Code Sections 53759.1 and 53759.2.
Under Proposition 218, prior to approving any proposed increase to utility rates, the City and RUA are required to mail a notice of the public hearing (scheduled for January 13, 2026) no later than 45 days prior to the hearing. The property owners have a right to submit a “written protest” prior to the close of the public hearing to consider a proposed rate increase, and the City may not approve the proposed rate increase if there is a “majority protest.” There is a majority protest if the number of written protests received from parcels subject to the rate increase is more than one-half of the total number of parcels subject to the rate increase.
Under AB 2257, property owners have a right to submit a “written objection” by the deadline specified in the mailed notice of public hearing, and that deadline must be at least 45 days after the notice is mailed. The written objection must identify the substantive reason why the proposed rates do not comply with legal requirements under Proposition 218. The City is required to prepare a substantive written response to timely written objections, and the written response will be presented as a part of the public hearing. A property owner is prohibited from challenging updated rates in court unless the property owner has identified the substantive concerns in a timely written objection (to exhaust the property owners administrative remedies).
The form of the Mailed Notice of Public Hearing, which includes the proposed water and wastewater rates and is provided in both English and Spanish, is included as Exhibit “A” to the City and RUA Resolutions (Attachments 6 and 7).
ENVIRONMENTAL IMPACT
The is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include: (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY
Approval of the proposed action also complies with the following City of Rialto Guiding Principles, General Plan Goals and Policies: “Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.”
Approval of this action also complies with the City of Rialto General Plan Goal and Policy:
Goal 3-6: Require that all developed areas within Rialto are adequately served with essential public services and infrastructure.
Policy 3-8.4: Advocate regular evaluation of the entire water supply and distribution system to ensure its continued adequacy, reliability, and safety.
LEGAL REVIEW
The City Attorney's Office has reviewed the staff report and resolutions and approved them as to form.
FINANCIAL IMPACTS
Operating Budget Impact
The Water Resources Economics Rate Study (October 2025) evaluated the financial performance of the City’s water and wastewater utilities under current and projected operating conditions. The analysis concluded that periodic rate adjustments are necessary to maintain long-term financial stability, ensure continued investment in essential infrastructure, and comply with the financial and reserve provisions outlined in the City’s existing agreements.
For both the water and wastewater funds, the study recommends a multi-year adjustment schedule beginning in FY 2026 to align revenues with projected operating and capital costs over the five-year planning horizon. These recommendations reflect anticipated increases in system operation and maintenance expenses, planned capital improvements, and the need to maintain adequate reserves and coverage ratios in accordance with established financial policies.
Capital Improvement Budget Impact
The adopted financial plan supports the City’s ongoing Capital Improvement Program (CIP) for water and wastewater infrastructure. Over the five-year planning period (FY 2026 - FY 2030), the rate study identifies funding strategies for planned system rehabilitation and replacement projects, treatment upgrades, and other priority improvements needed to ensure service reliability and regulatory compliance.
Implementation of the recommended adjustments will allow the City to continue meeting its operational and capital obligations without reliance on non-utility funding sources, consistent with the rate-setting principles and financial structure described in the October 2025 Rate Study.
Licensing
This action does not require a business license.
ATTACHMENTS
1. October 2025 Rate Study Report
2. City Resolution Establishing Utility Rate Setting Procedures
3. RUA Resolution Establishing Utility Rate Setting Procedures
4. City Resolution Setting Public Hearing Date
5. RUA Resolution Setting Public Hearing Date
6. English Exhibit “A” to Public Setting Public Hearing - Mailed Notice of Public Hearing Under Proposition 218 and AB 2257
7. Spanish Exhibit “A” to Public Setting Public Hearing - Mailed Notice of Public Hearing Under Proposition 218 and AB 2257
8. English Newspaper Notification of Public Hearing
9. Spanish Newspaper Notification of Public Hearing